I was visiting Wheaton College in Norton, MA, yesterday with my husband and son, who is just beginning to get interested in finding a college.
While I was at the beautiful campus during the fall open house, I sat in on a session devoted to financial aid. Lots of parents had showed up to hear the financial aid officer and the anxiety level was nearly palpable. With the stock market a mess and a recession looming, parents were naturally wondering how they could possibly pay for a school that is more than $48,000. Gulp.
Ironically, the question that the parents at Wheaton repeatedly asked about at the session concerned the money in their 529 college savings accounts. They were obviously worried that the money they saved was going to disqualify them for financial aid.
Frankly, these parents were asking the wrong question. Money in 529 plans very rarely will disqualify families from financial aid. One big reason is that a parent is only assessed 5.64% for financial aid purposes. So if a family had saved $10,000 only $564 of that amount would be disqualified for financial aid consideration.
What is more important in aid calculations is the family income. Rather than fretting about cash in a 529 account, parents should be looking for schools that would reward them if their child attended the school.
Affluent families who want a break in price should be looking for schools that provide merit money and needy families should be hunting for schools that provide good financial aid packages that are heavy on grants and light on loans.
I will share more about getting price breaks for college in the next couple of posts. For more on college financial strategies, read my book, The College Solution.